World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Tuesday, December 30, 2008

More taxpayer money being donated by our government. Note the criminals, ooops, I mean companies named to “manage” these shit sandwiches. Unbelievable, totally corrupt bankrupt behavior. I USED to get mad when I saw this, now I simply realize that we are just being robbed and that the reset is on its way. The more of this they do, the quicker the reset comes and the sooner the pain will be over. I’m still amazed Americans haven’t gotten off the couch to actually DO something about it. “Minimal risk,” my ass – excuse me, I have to go crème de la crème in the restroom now!

Off the “wires:”(US) FED PLANS TO BUY $500B IN AGENCY MBS BY THE END OF JUNE

(US) FED PLANS TO BUY $500B IN AGENCY MBS BY THE END OF JUNE, PURCHASES WILL BE LIMITED TO FIXED-RATE MBS- The 4 investment managers for the purchases will be Blackrock, Goldman Sachs, PIMCO, Wellington.

“They picked the crème de la creme of the money managers,” said Art Frank, head of mortgage-bond research at Deutsche Bank AG in New York. “By doing $500 billion by June, no question they’re doing their best to try to hold down mortgage rates.”

The collapse of U.S. mortgage finance last year led to the worst credit crisis in seven decades and triggered write downs and losses at financial institutions exceeding $1 trillion. The central bank has expanded credit by $1.3 trillion over the past year through programs extending liquidity to banks, bond dealers and other financial institutions. The Fed plans to create money to purchase the bonds, boosting bank reserves.

Only fixed-rate agency mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae will be eligible for purchase, the central bank said in a statement released in Washington today. The purchases, to start early in January, will include securities with maturities of 30, 20, and 15 years, and will exclude riskier securities such as interest- only bonds, the Fed said.

The Fed’s program is intended to lower rates by reducing the supply of outstanding agency mortgage bonds, boosting their prices and thus lowering their yields. Lower yields in turn reduce the interest rates banks need to charge on new mortgages to ensure profitable sales of the securities.

‘Very Quickly’

“It looks like they’re really going to ramp this up and it’s going to be done very quickly,” said Credit Suisse analyst Mahesh Swaminathan. Thirty-year mortgage rates could fall to an average 4.75 percent, he said, and “this is going to take it down sooner rather than later.”

The average rate on a typical U.S. fixed-rate mortgage fell to 5.22 percent early yesterday, the lowest since 2005, from as high as 6.46 percent in October, according to Bankrate.com data. The Treasury also bought $49.7 billion of the companies’ home- loan securities from September through last month.

“The investment managers will be required to purchase securities frequently and to disclose the Federal Reserve as principal,” the central bank said. “Each investment manager will be required to implement ethical walls that appropriately segregate the investment management team” that implements the Fed’s purchases from advisory and proprietary trading teams, the Fed said.

‘Minimal’ Risk

The central bank said risk on the securities would be “minimal” and “mitigated by the conservative, buy-and-hold investment strategy” of the program.

Fed officials announced the program Nov. 25 and said the action was taken to “reduce the cost and increase the availability of credit for the purchase of houses.”

The government hasn’t stemmed the decline in housing even after channeling $172 billion in new capital to banks. The Fed has provided $535 billion in loans to banks as of Dec. 24. Slumping sales and tight credit helped push home prices in 20 major U.S. cities a record 18 percent lower in the 12 months to October, according to the S&P/Case-Shiller index released today.